Remittance Keeping aside SBPs enthusiasm for robust home remittances where the central banks press release (mistakenly) showed a month-on-month increase in October 2015 foreign receipts instead of an equivalent fall, remittances growth have continued to show its redeeming qualities; Its share in countries GDP has been on an increasing growth trajectory
As per the SBP data, October 2015 inflows from expatriates increased by 11 percent compared to October 2014, but dipped by over 13 percent in month-on-month comparison. For the first four months of remittance from overseas Pakistanis has grown by seven percent year-on-year to $6.5 billion. Though these foreign receipts are higher than comparable last year, the growth rate for 4MFY16 is one of the lowest in similar period of the last five years, showing some sort of growth deceleration
While the annual growth rates do not show any particular signs of slowing down, chances are that the remittances growth will slow down in the coming years as indicated in World Banks recently released Migration and Development Brief.
World Banks October issue briefs about the recent developments in remittances in developing countries. It has projected the growth rate of remittances of developing countries to fall from 3.3 percent in 2014 to two percent in 2015 primarily due to the US dollar appreciation against the currencies of remittance-sending countries.
Similarly, the latest regional economic outlook of the International Monetary Fund (IMF) also indicates that the remittances from GCC countries can have a dampening effect due to the decline in oil prices and their impact on economic growth in these countries.
Under both these statements, remittance receipts in Pakistan have a good chance to be adversely affected in the coming days.
This is so because firstly, remittances are extremely important for a country like Pakistan where the share in GDP exceeds six percent with a significant share in total foreign reserves. And secondly, over 60 percent of the remittance inflows come from the GCC – oil producing countries.
While remittances have been growing despite the fall in crude oil prices, the policy makers should gear up for and turn up a notch especially after the confirmation warning signs from the World Bank and the IMF.
The growth in South Asia region is anticipated to be moderate over the next couple of years, and the two reasons World Bank states for the anticipated deceleration are the decrease in remittances after lager inflows following the Nepal earthquake, and reduced inflows in Pakistan from the GCC world due lower oil prices.
Originally published: November 12, 2015 in the Business recorder (BR) research.
